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Technical Outlook: Aussie broke below confluence slope support at ~7778 last night on the heels of a lackluster print on 3Q CPI. The decline is now targeting a critical support confluence highlighted in yesterday’s weekly technical perspective at 7630/65. A break below this mark risks substantial losses for the pair with such a scenario eyeing the lower median-line parallel, currently ~7570s.

Notes:A closer look at price action highlights AUDUSD trading within the confines of a descending pitchfork formation extending off the yearly highs. Note that the lower 50-line (blue) converges on yearly slope support (red) around 7675 with the 61.8% retracement of the May advance just lower at 7632- an area of interest for possible exhaustion / long-entries.

Interim resistance now stands at 7750 with our immediate focus lower while below the median-line / November highs at ~7778. Bottom line: looking lower for a reaction at critical long-term support for a possible near-term recovery in price. Added caution is warranted heading into the close of the week with the release of US 3Q GDP figures likely to fuel increased volatility in the USD crosses.

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A summary of IG Client Sentimentshows traders are net-long AUDUSD- the ratio stands at +1.16 (53.6% of traders are long) – Weak bearishreading

Long positions are 2.9% lower than yesterday and 3.8% lower from last week

Short positions are 11.0% lower than yesterday and 10.1% lower from last week

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests AUDUSD prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger AUDUSD-bearish contrarian trading bias from a sentiment standpoint.

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